'We took too much risk in toxic property sector,' admits former AIB chief
Published 30/04/2015 | 02:30
Risky bank lending to property developers by AIB could have been stopped, the former bank group chief executive Eugene Sheehy confessed to the Banking Inquiry.
"We took too much risk in a sector that turned out to be toxic," he told Senator Susan O'Keeffe, adding: "I was CEO, I could have stopped it."
The former CEO said this was why he was apologising to the Irish people. He had "failed" in his responsibilities during his tenure and this was "a matter for me of eternal regret".
He said he knew a lot of people were let down, felt very angry and rightly so. "I take personal responsibility for my action," he added.
Mr Sheehy's view of the Bank Guarantee was that it was "critical in providing liquidity" and he did not think "any Irish bank would have survived" without it, he told Michael McGrath TD.
He was under the impression that night, however, that it referred to four and not six banks.
Mr Sheehy, who was present on the night of the Bank Guarantee on September 29, 2008, told how the AIB team was "dismissed" four times from Government discussions.
He said they were not present while the guarantee was being discussed - but it was his understanding that four pillar banks would be guaranteed and that Anglo and Irish Nationwide banks would be nationalised.
Mr Sheehy said they made clear his bank wanted a two-year guarantee rather than one year being proposed. They were asked to leave while a drafting process was undertaken.
Mr Sheehy then described the shock of his team when they saw the document for the first time later that morning.
"We could not understand why Anglo and INBS were included. All our discussions that night were based upon the premise that Anglo was to be taken down and as such we did not think they would be part of the guarantee."
Asked by Deputy Kieran O'Donnell about a request for AIB to consider taking over Anglo Irish Bank, Mr Sheehy said it was discussed by the group executive and dismissed. The board accepted the decision of the group executive.
Mr Sheehy, who in 2006 had a total remuneration package of €2.4m including a €1.3m bonus, told Deputy O'Donnell that "the numbers are very high and not justifiable".
He agreed "there was no way you could tell anyone on the streets these were acceptable levels of pay".
Earlier, former AIB CEO Michael Buckley made his own apology - saying he deeply regretted the damage caused.
Both Mr Sheehy and Mr Buckley told the inquiry they had taken substantial cuts in their pensions. Mr Sheehy's was €250,000 but Mr Buckley said he did not wish to disclose his pension figure.
Mr Buckley denied the bank took too much risk in his time as chief executive up to 2005 and said there was no evidence of "reckless lending".
Current AIB chief executive David Duffy said if the bank guarantee had not been put in place "it could have led to a more severe outcome". He had joined in 2011 and faced radical restructuring which included 4,000 job losses and a €350m cost-cutting programme, with pay cuts of €230m.
Meanwhile, developers Sean Mulryan, Joe O'Reilly and Michael O'Flynn are among those called to the next phase of the banking inquiry, along with financier Derek Quinlan.
Former AG Paul Gallagher, former secretary general of the Department of the Taoiseach Dermot McCarthy and former advisers to Brian Lenihan Cathy Herbert and Alan Ahearne have also been called.